Tuesday, June 20, 2006

Eleventh Circuit Rules that Plaintiff Bears Burden of Proof for “Local Controversy” Exception to Federal Jurisdiction under CAFA

Per Evans v. Walter Industries, Inc., --- F.3d ----, 2006 WL 1374688 (11th Cir. May 22, 2006):

CAFA's language favors federal jurisdiction over class actions and CAFA's legislative history suggests that Congress intended the local controversy exception to be a narrow one, with all doubts resolved "in favor of exercising jurisdiction over the case." S.Rep. No. 109-14 at 42. The Senate Report on CAFA further states that the local controversy exception: "is a narrow exception that was carefully drafted to ensure that it does not become a jurisdictional loophole…."

The district court correctly determined that the plaintiffs bear the burden of establishing that they fall within CAFA's local controversy exception. CAFA allows for removal of class actions that meet certain minimal requirements. CAFA does not change the traditional rule that the party seeking to remove the case to federal court bears the burden of establishing federal jurisdiction….The parties do not dispute that the defendants have carried this burden and established that this action meets CAFA's basic requirements for removal to federal court--i.e., the controversy exceeds $5,000,000 and at least one plaintiff and one defendant are from different states (the minimal diversity requirement). However, when a party seeks to avail itself of an express statutory exception to federal jurisdiction granted under CAFA, as in this case, we hold that the party seeking remand bears the burden of proof with regard to that exception.

To avail themselves of the local controversy exception, the plaintiffs must prove that greater than two-thirds of the proposed class members are Alabama citizens…Plaintiffs have offered little proof [of this]. [W]e know nothing about the percentage of the total class represented by the 10,118 people on which plaintiffs' evidence depends. Moreover, the class, as defined in the complaint, is extremely broad, extending over an 85-year period…plaintiffs have not carried their burden of demonstrating that more than two-thirds of the plaintiff class are Alabama citizens.

We also hold that plaintiffs have failed to prove the "significant defendant" prong of the local controversy exception…Plaintiffs rely on their complaint and an attorney affidavit to establish that U.S. Pipe is a significant defendant. These documents, however, do not provide any enlightenment at all with respect to the significance of the relief that is sought against U.S. Pipe, or its comparative significance relative to the relief sought from the other 17 named co-defendants. In short, there is simply no evidence that U.S. Pipe was "significant" with respect to liability.


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